The VC industry has had a couple of great waves in the past couple decades: the Internet boom and then the smartphone.
Both of these technological shifts enabled developers to write code and create a startup business that generates value in a new way, very often with a new business model enabled by the Internet or the phone. The smartphone, pioneered by Apple's iPhone, still tapped into the Internet, but it gave developers a new interaction model (touch screens) and new data from the phone's sensors.
But the iPhone came out 10 years ago, and innovation has started to slow, along with the health of many VC portfolios. In order for VC's to thrive again, they need a new development platform to take off.
Follow the Developers
Wherever developers are prototyping new, cutting edge apps, VC's are looking for a sign of life that something bigger could be around the corner. That not just one app is possible, but thousands. Today, there are four key areas worth exploration: VR/AR, cars, home and voice.
All of these development platform industries have big bets from the largest technology companies in the world.
- · VR/AR: Apple, Google, Facebook, Samsung
- · The Car and Autonomy: Google, Apple, Uber, Baidu, Alibaba, etc.
- · Home: Microsoft, Google, Amazon
- · Voice: Amazon, Google, Apple, Microsoft, Facebook, Baidu, Alibaba, Tencent
VR/AR and voice bring new interaction models for how consumers digest content and information. Cars and the home provide new environments with new sensory information previously unavailable to developers.
All of these spaces require too much capital for a VC-backed startup to bring its technology offering to market. Oculus needed to be acquired by Facebook, all of the leading autonomy initiatives have had exits already, etc. So, what's left for the VC industry?
Patience is a Virtue
One or multiple of these development platforms will take off and bring with it the next wave of VC-backed startups. But until then, I would be much more skeptical of investing as an institutional investor putting money into VC funds as well as a VC partner.
There are still opportunities in less-sought after industries with the existing development platforms like: B2B distribution, freight trucking, medical devices, IoT and finance. However, more heavily regulated industries move slower and follow their own trajectory to open up to new innovation.
Lastly, blockchain has been all the rave recently with ICO's (initial coin offerings), but cryptocurrency isn't yet a scalable development platform. While Ethereum has been getting a lot of hype, the technology is still likely years away from providing the kind of infrastructure that can support just one application with millions of users, let alone multiple applications of that scale simultaneously. More on this another time...